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- Albert and Johny are the only sellers of Motorbikes in Ireland. The inverse market demand function for motorbikes is P(Y)= 200- 2Y . Both firms have the same total cost function: T(C)= 12Y and the same marginal cost: M(C)=12. Suppose now that the two firms decide to act like a single monopolist. What will the total quantity of Motorbikes sold in the market be and what will the equilibrium price be? Represent the profit maximisation problem on a graph and indicate the price and quantity at the equilibrium. Calculate the total profit made by the two firms when they act like a monopoly. Compare it with the total profit they were making in the Stackelberg oligopoly. For the two firms to be willing to agree to act as a monopoly, how should they split the quantity to produce between them? We assume that if they do not agree to act like a monopoly, then the market structure is the Stackelberg oligopoly studied above. We further assume that no money transfer is possible between the two…Imagine any market divided by 2 Cournot oligopolists who have identical costs Marginal cost = Average cost = 200. About this market, ask yourself: a) If the demand curve for this market is given by Q = 1250 - 2.5P, where Q is the total quantity demanded in the market and P is the selling price, both given in units, what is the reaction curve of the oligopolists? b) What will be the quantity produced and the selling price of the oligopolists? c) A strategist considers that a good marketing campaign would be able to expand the Demand of this market to Q = 1,500 - 2.5P and that in this way, oligopolists could produce the same amount and make significantly greater profits. Such a campaign would generate a reduction in profits in the order of 70,000. Is it worth making this investment in marketing?Consider the fish market where demand is given by the following equation: P=52-Q where P is the price in dollars and Q is the quantity in kilos. All firms are identical and the marginal cost is 12. 15-If the market were competitive, what would the price be and how many units would be produced? You must provide your calculations. 16-If the market was made up of only one firm (a monopoly), what would the price be and how many units would be produced? You must provide your calculations. 17-If the market was made up of two firms (a duopoly) and they chose their level of production simultaneously: what would the price be and how many units would be produced by each firm? You must provide your calculations. 18-If the market was made up of two firms (a duopoly) and firm 2 was dominant (i.e. it chose its level of production first): what would the price be and how many units would be produced by each firm? You must provide your calculations. 19-Compare the quantities produced by each of the…
- Assume that the demand for electric cars is p = 100-q (where q is the quantity and p is the price), and that an innovation can reduce the constant marginal cost of production from 70 to 60. What is the definition of nondrastic/drastic innovation? Confirm that the innovation for electric cars is nondrastic. Show that marginalcost would have to be reduced to less than 40 for theinnovation to bedrastic. Suppose that the industry is a monopoly (not threatened by entry). Howmuch is this firm willing to pay to acquire the innovation?Consider any market that has a demand curve given by: Qd = 240 - 2P. Where Qd is the total quantity demanded in the market, given in millions of units and P is the market price, calculated in monetary units. Imagine that there are 2 Cournot oligopolists operating in this market with Cmg = CVme = 15 and fixed monthly costs equal to 1,400. About this market, ask yourself: a) What is the profit of each of the oligopolists? b) Imagine that one of the companies managed to implement a process innovation capable of halving its Cmg and CVme, so that they would go from 15 to 7.5. This investment implies an additional monthly expense of $1,800. Discuss the statement: "If this situation occurs, the innovative company will not implement variable cost reduction, as the quantity supplied in the market will increase very little; prices will remain very close to what they are today and its profits will not increase"A monopolist can produce at a constant average and marginal cost of ATC = MC = $5. It faces a market demand curve given by Q = 53 - P. Suppose there are N firms in the industry, all with the same constant MC = $5. Find the Cournot equilibrium. How much will each firm produce, what will be the market price, and how much profit will each firm earn? Also show that as N becomes large, the market price approaches the price that would prevail under perfect competition. (Hint: your answers will be functions of N)(BONUS)
- Firm P has a monopoly on producing printers, and Firm C has a monopoly on producing computers. Printers and computers are complements, and Q is the number of bundles, with one printer and one computer in each bundle. Pp is the price of a printer, and Pc is the price of a computer. The demand function is Q = 10 – Pp – Pc, and marginal cost is zero. he two firms will choose prices to maximize profits, but neither firm knows the price charged by the other firm. Calculate Q, Pp, Pc, and profits for each firm.The following figure shows the demand for monopolists Price 20 10 O Quantity a) 60 b) 59 c) 96 d) 62 Assume that the monopoly has two plants-plant 1 and plant 2. Cost function is given for plant c;(q;)=2+4gifq; > 0 1. i=1,2. c;(q) = 0,otherwise Find the optimal profits. 10 20Consider the following two groups of consumers in the market for movie tickets – Suppose the Marginal Cost of selling to either group is the same and equal to $4. At the monopoly price for each group, demand elasticities are as follows: Esl= 3 and |Ewl= 2, where Es is the elasticity of demand for students an d Ew is the elasticity of demand for working adults. The Lerner Index of Market Power is higher for students than working adults. Students and Working Adults. True False
- Assume that instead of having two firms in the market, we have a monopoly facing the inverse demand P = 400 − 10Q. The monopoly’s marginal cost is $10. Suppose the Monopoly can first degree price discriminate. Find (calculate) the Monopoly’s quantity, price, profit, the consumer surplus and thedeadweight loss in this case. Draw a representative graph here.Consider the case of a monopolist who charges the same price to all consumers. The demand for the good is given by Q=813-7p, where Q denotes the quantity demanded at price p. The firm's total cost of producing Q units is given by the function C(Q) = 7 Q What is the efficiency loss in the monopoly equilibrium? (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number.)A monopolist faces the following market demand function: D(P) = 100 – P and has total costs equal to TC(Q) = 100 + 100 Show that the monopolist's cost function is subadditive for all relevant levels of demand (for all Q< 100). (Hint: Let EN Qi = Q be a way to split up the total production of quantity Q in N different firms. You can then use the fact that the minimum of EN Q? is reached at Qi = 8.)
